What’s in a good investment pitch?

When raising investment for your small business, you have to be ready to pitch at any moment. Anyone you meet could be an investor. It could be the person standing next to you on the bus, someone you meet at a networking event or party or even someone you play sport with in your spare time.

Depending on the circumstances you may not have long to pitch. In some cases you might only have a minute to get your business across (the classic “elevator pitch” scenario), whilst in a more formal pitch environment (such as at an angel network pitch evening) you might have 15 or 20 minutes. Certainly, you won’t always have a Powerpoint presentation. You have to be ready for any eventuality.

So what should be in your business pitch?

A good place to start is with the business concept. What is it your business does? What problem are you solving for your customers? Even in a 20 minute pitch you don’t have long (and there are other things you need to talk about in addition to your products and services) so keep your explanation short and to the point. Focus on the key points and what makes your product/service different. If you are talking about your product/service for more than 25% of the length of your pitch than you are probably going into too much detail.

Next up, talk about sales. What’s your business model and how do you generate revenue? Investors love to hear that you have more than one revenue stream and that you have experimented with different routes to market and identified the most successful channels. Ideally you are looking to show that you’ve hit upon a selling formula that delivers predictable results and is ready to be scaled up.

Businesses don’t make themselves. It is people who make businesses successful. You must introduce yourself and your team in your pitch. You’ll want to talk about the team’s background, skills and experience. Leave the investor in no doubt that you have the right mix of people to drive this business forward.

Your team should start to build your credibility in the eyes of an investor but you want to cement this by talking about your business achievements to date. Highlight any key milestones you have achieved: Key strategic partnerships you have formed, contracts you have won and revenues in the bank. Your pitch needs to demonstrate that you are already delivering results, even without the investment.

No pitch is complete without some numbers. If you are already revenue generating share what monies you have banked. Forecast future revenues (realistically – no one will believe “pie in the sky” numbers) and be clear about your margin and breakeven. Be specific about how the money you raise will be used, and provide revenue and profit predictions for the point at which you plan to exit the business. You must have an exit plan. Investors will want their money back at some point. Without an exit they don’t get a return!

Finally, be clear about how much equity you are selling in return for the investment. An unrealistic valuation can ruin an otherwise brilliant pitch. For advice on valuing your business, download my e-book.

Given you need to be ready to pitch at the drop of a hat, and that you can’t always rely on a Powerpoint presentation to help you remember everything you want to get across, you might find it helpful to have this little mnemonic in your mind to make sure you cover the main points. It’s based around the middle letters of the alphabet:

Image showing what's in a good pitch
Oh, and one final thing, be sure to pitch with passion! If you’re not excited by your business why should an investor get excited? Pitch with energy and enthusiasm and remember to smile and make eye contact.

Good luck!

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If you would like help in developing your investment pitch, contact me , Hatty Fawcett, to book a phone call.

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What is Crowdfunding?

**** Free, live and interactive webinar “How to succeed at crowdfunding” packed full of practical crowdfunding advice, insider tips and resources that support your crowdfunding campaign. RESERVE YOUR FREE PLACE ****

Everyone is talking about crowdfunding these days. Not surprising really. It’s not just a hot topic but a very useful tool too. In 2015 some 300,000 businesses raised £3 billion through alternative finance or crowdfunding (Source: Pushing Boundaries: The UK Alternative Finance industry Report 2015, NESTA and The University of Cambridge). These figures have almost doubled since last year so crowdfunding is improving access to finance but the area of investment is still cloaked in mystery.

Crowdfunding demystified
Put simply crowdfunding is a way of financing projects and businesses through small contributions from a large number of backers, rather than large amounts from one or a few sources.

Image showing the principal of crowdfunding

Typically an entity (usually a business but it could also be an individual or group of individuals involved in a project that may or may not be profit making) posts a “pitch” onto a crowdfunding platform. This pitch explains the nature of the enterprise, the team involved, how much money is needed, how the money will be used and what “reward” is being offered in return for cash. Interested parties reading the pitch then decide if they want to back the idea by providing cash.

What makes crowdfunding work is the networking effect of people talking about the project and encouraging others to get involved. Word spreads far wider than the group of people known to the enterprise.

A crowdfunding pitch runs for a defined period (although the exact period will vary from pitch to pitch, platform to platform). On the majority of platforms if an enterprise fails to reach its crowdfunding target by the deadline then the enterprise receives none of the monies raised and the cash is returned to the people who pledged it.

So far, so good.

The complication comes because there are several different types of crowdfunding and many, many different platforms. Predominately, what defines the difference is the “reward” mechanism used by each platform.

There are 4 types of crowdfunding platform:

Image showing the four types of crowdfunding platform with examples
Donation
This is probably the platform that is most familiar. No doubt we’ve all been approached by a friend or relative at some point who tells us they are doing something amazing (like running a marathon, climbing a mountain or cycling across a continent) and requesting sponsorship for their favourite charity. In this case the “reward” for your hard earned cash is a lovely warm feeling of having supported your friend and a worthy cause. Examples of this type of crowdfunding platform are Just Giving and Virgin Money.

Reward
A reward-based crowdfunding platform is one where the entity raising money offers something “in kind” in exchange for cash. The nature of the reward here can vary hugely.  I’ve come across many examples including:
A zombie film which attracted investment in exchange for the opportunity to appear in the movie as an extra, in this case a zombie!
Companies making a prototype and then funding its manufacture by offering people the chance to be the first to own the product when it came off the production line. Effectively pre-selling a product before it was actually made.
A group of villagers clubbing together to save their village pub (in Suffolk). I can only assume the reward here was free beer!

Indigogo and Kickstarter are the best known reward platforms but there are a plethora of reward based crowdfunding sites, many serving niche markets and specific groups of customers.

Loan
The loan-based crowdfunding platforms are, arguably, the most successful in that they account for the greatest amount of monies raised. Here, a company (and it usually is a business rather than a one-off project) raises investment in exchange for a higher than average interest rate over a fixed period. Examples in this arena include Funding Circle and Funding Knight but, like the reward based platforms, there are many, many platforms each serving a specific niche.

Equity
Equity-based platforms allow a company to issue shares in their business (without the bother of having to list on a stock market) in exchange for investment. I successfully used this type of crowdfunding platform to raise investment for a business I was running back in 2013. Effectively 10% of the shares in my business were bought by 65 investors.

Investing in businesses is risky. So, anyone investing on the equity crowdfunding platforms has to self-certify as either a high net worth individual or a sophisticated investor, showing they understand the risks of investing in businesses. The best-known examples of this sort of crowdfunding platform are Crowdcube and Seedrs.

Some equity-based crowdfunding platforms have gone even further and rather than opening their platforms to “all” they limit participation to a subset of high net worth individuals and sophisticated investors known as business angels. These investors are generally more “hands on” with the companies they have invested in. They bring skills, experience and contacts, as well as cash, to the businesses they invest in. Examples of this type of platform include Angels Den (for whom I am a Regional Manager) and Syndicate Room.

So, there are many flavours of crowdfunding and part of the skill of developing a successful crowdfunding campaign is selecting the right approach and platform for your project or business.

**** Free, live and interactive webinar “How to succeed at crowdfunding” packed full of practical crowdfunding advice, insider tips and resources that support your crowdfunding campaign. RESERVE YOUR FREE PLACE ****

If you would like help in assessing your options, why not book a place on my next (free) Funding Clinic (in Poole Dorset) or contact me , Hatty Fawcett, direct to discuss your options.

How to value your start-up: A brief, practical guide

Register and download your copy of the “Valuing your small or early stage business: Art or science?”

There comes a point in the life of every business when you know you need more investment to maximise the business opportunity.

If your business is a start-up or small business you may not have the track record or assets to access traditional forms of lending. Alternative finance can be a welcome lifeline. You may also feel you want to bring additional expertise into the business. In which case, angel investment where the business angel brings expertise, skills and contacts as well as their cash can be a better option for raising investment.

Whatever form of investment you choose, you will need to issue shares (equity), which means you will need to value your business. But what is your business worth? How do you value a small or early-stage business?

Valuing your small or early stage business ebookThis brief, practical guide will take you through:

  • Why formal valuation models will only take you so far
  • How to focus on tangible demonstrations of value
  • Why valuation is a negotiation
  • How to replace “finger in the air” estimates with modelled forecasts
  • Why it pays to listen and learn
  • How to chose your investors wisely

All of which will give you a better idea of the true value of your business.

Register and download your copy of the “Valuing your small or early stage business: Art or science?” now